Email this article to a friend

Sharks, Mafia and swingeing job cuts - just some of the stories surrounding the saga of formerly private equity-owned care home operator Southern Cross Healthcare – aren’t the best PR for the buyout industry’s investments in the residential care sector. But UK-based HgCapital hasn’t been deterred from announcing a similar acquisition amidst of the controversy over the impact of Blackstone Group’s ownership of Southern Cross.

HgCapital has bought Mainio Vire, a Finnish company whose business comprises elderly care, mental health care, child day care and home services, according to a statement. The company has 1,675 beds and seven day care centres for children, and employs about 1,150 staff.

The deal’s value remains undisclosed but HgCapital Trust, a listed HgCapital investor, will commit about £12.5m to the investment.

The transaction has come amid a wave of criticism over Blackstone’s high-profile investment in Southern Cross, whose shares have plummeted since Blackstone sold its remaining stake in the business in 2007. Blackstone acquired the company in 2004, built it up through debt-financed acquisitions, before selling the company on the public equity market for an estimated fourfold return in 2006.

Attacks against Blackstone have included allegations of asset-stripping and last week the firm defended its ownership of the company after representatives of the GMB union, which represents about 10,000 workers at Southern Cross homes, staged a protest outside a London meeting of private equity firms, including Blackstone. The union called Blackstone "predators who destroyed Southern Cross" with excessive debt. Placards branded Blackstone executives as “sharks” and accused private equity firms as being “more secret than the Mafia”.

However, HgCapital is likely to have worked on the deal for many months and a spokesman for HgCapital said, “[deal] opportunities present themselves in the market”. He highlighted the firm’s 2006 investment in UK residential care provider Voyage Group had avoided the strategy that gained some of the biggest criticism for Blackstone – splitting the business into an operating company and a property company.